COVID-19: How Bad Could It Get?

By Stan Aronow | March 16, 2020 | 0 Comments

Supply ChainBeyond Supply Chain

It is hard to believe how quickly the COVID-19 situation deteriorated last week. In the United States, it was a steady drumbeat of surreal news alerts — sports seasons cancelled, European travel banned, a national emergency declared, the Federal Reserve dropping rates to near 0%, the CDC recommendation to avoid crowds larger than 50 for the next eight weeks, the stock market in total disarray.

At this point in the humanitarian crisis, the important questions are: How bad could it get? How can we adjust our behaviors to avoid overwhelming the public health system as this coronavirus spreads? What can we learn from other countries that are further down the path?

For those of us in supply chain, this is an unprecedented disruption to our people, customers and suppliers. Beyond keeping everyone safe and healthy, and enabling products to flow smoothly, there are similar questions about where this event could go and what the aftermath might look like.

Let’s explore those topics, albeit in the short form of this blog.

COVID-19 Humanitarian Scenarios

You can find a thorough analysis of the epidemiology of COVID-19 and various scenarios for spread and impact, depending on how quickly communities elect to self-isolate, here. The Too Long; Didn’t Read is that the roughly one week lag time between initial infection and symptomatic people seeking treatment (and being recorded by health authorities) is exactly what allows this illness to spread exponentially. Moreover, it was only when countries like China (including Taiwan), Korea and Singapore began extensive quarantining, and testing and tracking of cases that their numbers avoided accelerating into “escape velocity.” One of the author’s theoretical models shows that fast-acting countries reduced the number of resulting deaths by 10x.

Another key factor in the COVID-19 fatality rate is the age of the person infected. A quick, back-of-the-envelope calculation based on U.S. demographics per Statista and China’s recent experience per would yield the following result for every 1% of the population infected with COVID-19.

200316 March Graphic Web

These numbers are similar to seasonal flu patterns. If you consider Angela Merkel’s recent public statement that 70% of German citizens might become infected, the corresponding U.S. numbers would be downright disturbing. Even at the 1% scenario, since almost one-fifth would likely require hospitalization per China’s experience, our medical system would be overwhelmed. All the more reason for us to heed our health authorities’ calls for social distancing and other interventions.

COVID-19 in the Workplace

On March 12, Gartner held a webinar with Dr. Steve Solomon, a former Centers for Disease Control and Prevention (CDC) associate director, to discuss the COVID-19 situation. It was standing-room only in the virtual auditorium. Everyone had questions about how to address different employee health scenarios and guidelines for sanitation of common workspaces such as factory and warehouse floors.

Here are key takeaways from that discussion:

  • Once a region reaches the CDC’s “Substantial” level of workplace or community cases, the recommendation is to screen all employees and visitors. This is ideally done in an interview format, either remotely prior to employees coming to work or in a way that ensures 6 feet (or 2 meters) of space between the interviewer and the respondent.
  • The lowest-risk action, if an employee screens as (even partially) symptomatic, is to send them home and tell them to contact their healthcare provider.
  • Testing is a critical aspect of containment. COVID-19 tests were slow to come online in the U.S., but are now available for people with a written request from a health professional.
  • Experimental studies have shown that COVID-19 can live on surfaces for up to nine days. CDC guidance is to routinely clean all frequently touched surfaces in the workplace such as workstations, countertops and doorknobs. Use the cleaning agents that are usually used in these areas and follow the directions on the label.
  • It is very important to stay in contact with your local health and safety agencies. Dr. Solomon’s experience is that not everyone does this, even in the healthcare industry. Critical decisions will be made at the local (state, county, municipality) level, so find your locality’s website, bookmark it and refresh it frequently.

Supply Chain in the Aftermath

As supply chain leaders, you are doing your best to deal with an extremely volatile situation that is both humanitarian and systemically disruptive. A few final thoughts to consider once we find our way out of the crisis:

  • Beyond surging interest in whether force majeure clauses can be invoked by suppliers, another future risk may be worker lawsuits relating to the preventative measures — or perceived lack thereof — to prevent the exposure to and spread of the virus.We recommend discussing this issue with your legal counsel, especially as employment laws can vary significantly across jurisdictions.
  • Tier 2 and beyond suppliers are often the most impacted by rapid economic downturns due to low working capital. Market exit by the weakest players would shrink supply markets, leading to more pricing power for remaining players. Alliance agreements by first movers would be one way to mitigate this risk.
  • In a recent virtual roundtable with our global COO/CSCO community, we polled about a dozen members on the shape they thought the economic recovery would take. The consensus was a “U-shaped” recovery, in which businesses see lower levels of demand for a significant period (most said seven-plus months), and then demand roaring back. Many supply chains were caught flat-footed in the initial bounce-back from the Great Recession. Effective demand sensing will be a critical capability to avoid repeating that scenario.

Returning to the closing words of Dr. Solomon from the CDC, there is an “epidemic of fear” running concurrent with the underlying health epidemic. As leaders and as a community, we should have rational, reasonable concerns and take appropriate, planful actions.

On a more optimistic note, we will find our way through this crisis with collective action. In normal times, supply chain professionals are the ones who make the world run, and some people hardly take notice. In these extraordinary times, we are the unsung heroes, the people who allow society to keep calm and carry on.

Stay safe!

Stan Aronow,
VP Distinguished Advisor,
Gartner Supply Chain


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